KUALA LUMPUR, June 15 – SME Bank is calling upon small and medium-sized enterprises (SMEs) to re-evaluate their business strategies to maintain competitiveness amidst the current economic climate. This comes as Bank Negara Malaysia (BNM) normalizes the monetary policy by raising the overnight policy rate (OPR) to 3.00%. BNM’s decision was partly influenced by robust domestic demand, leading to the country’s gross domestic product (GDP) expanding by 5.6% year-on-year in the first quarter of 2023.

Datuk Wira (Dr.) Aria Putera Ismail, the Group President/Chief Executive Officer of SME Bank, stated, “The increase in the OPR is intended to curb inflation and promote savings, while also reducing excessive risk-taking and speculative investments. The normalization of the OPR to 3.00% signifies a reduction in monetary stimulus aimed at addressing the impact of the COVID-19 crisis.” He further emphasized, “Within the SME segment, we have observed a strong expansion in financing applications, with a growth rate of 21.1% year-on-year in the first quarter of 2023, compared to a marginal decline of 0.1% year-on-year in the fourth quarter of 2022.

This indicates that SMEs’ demand for financing remains healthy. While the current monetary policy stance is slightly accommodative and supportive of the economy, SMEs facing challenges due to higher financing costs should reassess their business strategies to enhance efficiency and productivity. This may include managing operational costs, exploring new revenue streams, diversifying their customer base, or implementing new pricing strategies.”

Lynette Lee, Chief Economist at SME Bank, provided insights into the first quarter GDP performance, stating, “All sectors recorded positive growth, driven by robust domestic demand. While the manufacturing and services sectors have exceeded the average pre-pandemic levels of 2019, five out of seventeen sub-services sectors are still lagging behind, particularly food and beverage, real estate, and wholesale trade. The recovery in the tourism-related industry is expected to continue as consumption shifts from goods to services.

Although economic growth in 2023 will be driven by resilient domestic demand, SMEs must remain vigilant and adaptable as we anticipate some moderation in the growth trajectory due to rising external challenges, diminished pent-up demand, and the high base effect from the previous year.” SME Bank, in collaboration with its subsidiary, Centre for Entrepreneur Development and Research Sdn. Bhd. (CEDAR), stands ready to provide comprehensive business advisory and financial support to assist SMEs in navigating the changing economic landscape.

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